What do American Sniper, Chris Kyle and the Keystone XL pipeline have in common? Most Americans would probably say “nothing.” Unless that changes soon, U.S. President Barack Obama and the Democratic minority in Congress will succeed in sustaining the veto over Keystone that Obama exercised last week.

If the Republicans want to win this battle, they have to change their message. The Keystone pipeline is not about creating more jobs over the next three years, but about saving more lives over the next three decades — lives of young Americans being sent to the Middle East to defend America’s security of supply of imported OPEC oil.

The recent collapse of oil prices and availability of cheap gasoline have made it easy for Americans to forget how dependent on Middle East/Arab oil the U.S. and its allies still are. Thanks to the shale revolution of the past decade, U.S. oil production has risen three-million barrels per day (b/d) to 8.5-million b/d. But American consumption of oil is still double this amount, so the Americans are still importing 7.6-million b/d. While more and more of this is now coming from Canada — over three-million b/d — most of it still comes from the Middle East.

U.S. shale oil is not going to change this. Contrary to what most Americans may assume, OPEC’s share of global oil production has actually risen since 1985 from 30% to 39%. And OPEC’s share of global production is projected to continue to increase to 49% by 2040. To understand the implications of this, we need to understand what the world’s oil future looks like. Listed to the right are the top 14 nations in the world in proven oil reserves. Also noted is each nation’s rating in Freedom House’s 2015 Global Report on respect for political and civil rights.

Going forward, this is not a pretty picture. By way of summary, the U.S. has 1.5% of global reserves. Canada has 12.5%. We are the only two oil-rich nations to be rated “free.” Countries rated “not free” control 78%, while Muslim countries in the Middle East and North Africa control 62%. America’s “friends” in this region — Saudi Arabia, Kuwait, Abu Dhabi/UAE and Qatar — are all rated as “not free.” So, too, are Egypt and Jordan, which don’t figure in global oil reserves, but are currently allies in fighting ISIS and other Islamic terrorist groups.

All of these “friends” are highly inegalitarian, authoritarian regimes and are friendly mainly at the elite levels. As the aftermath of the so-called “Arab Spring” in Egypt and Libya has shown, at the street level, Al-Qaeda and now perhaps ISIS attract more affection than the United States. Remember, prior to 1979, Iran was America’s strongest ally in the region. In short, America’s “friends” in this oil-rich region are far from stable and are at risk of becoming a lot less friendly over the next few decades.

Note also that Russia and China rank high in oil and low on freedom. Neither of these countries will ever be reliable global citizens, much less allies of the U.S. Each has its own agenda to counter U.S. influence in their respective regions. Russia will continue to use its quasi-monopoly over regional oil and gas markets to blackmail European nations. The Chinese leadership aspires to regional hegemony in Asia, and now competes with the U.S. as the second largest importer of oil from the Middle East. To this end, China has doubled its military spending in recent years, with a focus on building submarines. China has also undermined the NATO/EU embargo on Iranian oil imports by being a willing buyer. This kind of behaviour can be counted on to continue.

If the Republicans are to win the battle over Keystone, Americans’ decision about the pipeline needs to be placed in this context. Over 7,000 young American men and women have died fighting in the Middle East since Iraq invaded Kuwait in 1991. Whatever other reasons American politicians may have used to justify military interventions since then — aiding allies, building democracy, homeland security — energy security has never been far below the surface.

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Today’s global economy, of which the U.S. and its allies are the largest beneficiaries, runs on oil, and most of this oil comes from the Middle East. OPEC figured this out in the 1960s. Now the Islamic terrorists have, too. In a worst-case scenario — war — the military implications of this imbalance are harsh. As Germany and Japan learned at the end of the Second World War, you cannot win a war if your tanks and planes run out of fuel (see http://www.keystonetoamericanprosperity.com/).

Intuitively, Americans sense this connection. Since 9/11, the threat of Islamic terrorism at home and the loss of American lives abroad has permeated Americans’ day-to-day lives. They see it all around them: on the evening news, security checks at airports, sporting events and the movie theatres — Hurt Locker, Zero Dark Thirty and now American Sniper. Even the neighbourhood garbage truck is emblazoned with the red, white and blue “United We Stand” logo. The Republicans just have to connect the dots. The message can be simple. As former governor of Montana, Brian Schweitzer, famously said: “You don’t have to send the National Guard into Alberta.”

Complete the Keystone pipeline — and the 830,000 b/d that it will bring from Canada to the United States — and the odds of Chris Kyle’s children having to do what their father did go way down.

National Post

Ted Morton is a senior fellow at the University of Calgary School of Public Policy and the Manning Foundation for Building Democracy. He previously served as the minister of energy and minister of finance in the government of Alberta.

Oil prices have fallen, and our economy will have to adjust. This prospect may alarm many, but Canada has had to adjust to similar shocks throughout its history. The Canadian economy altered its structure in order to take advantage of higher resource prices, and part of that shift will now have to be undone.

There’s no point in pretending that this is anything but a negative shock, but it is possible to overstate the bad news. Firstly, the change in the Canadian economy over the past decade has often been overstated, and sometimes wildly exaggerated. Secondly, the ability of the Canadian economy to adjust is not well-enough appreciated.

No one will be surprised to learn that higher oil prices spurred more oil production, but the increase was surprisingly modest: The average growth rate of after the 2002 was 3.6%, compared to 2.6% during the preceding 12 years. But since other sectors have been growing even faster, the oil and gas sector’s share of GDP declined from 6.4% in 2002 to 6% in 2014. Its share of employment has increased, but is still only 1.7% of the total. Claims to the effect that Canada has become a “petro state” or that its economy is largely dependent on oil simply do not mesh with the facts. As far as output and employment are concerned, the Canadian economy of 2015 is surprisingly similar to what it looked like in 2002.

One area where oil has played a significant role is exports. Oil exports have increased in value by over 150% — although they still account for less than one-fifth of the total. But here the story is primarily one of prices: The effect of higher prices received outweighs that of the increase in the quantity exported. Now that oil prices are falling, this effect will be reversed. The adjustment in prices — mainly through a depreciating exchange rate — will be painful: It will reduce consumers’ purchasing power. But the adjustment would be even more painful if we had a fixed exchange or rate — or worse, if we didn’t have an exchange rate to depreciate.

A lower exchange rate has the same effect as an economy-wide wage cut. This isn’t good news, but it’s much less painful than using widespread unemployment to force a reduction in wages. This is a hard lesson that Canada learned long ago: the decision to let the dollar float in 1950 — after yet another series of swings in commodity prices — flew in the face of Bretton Woods-era conventional wisdom. But as the Eurozone economies are learning to their cost, flexible exchange rates allow economies to absorb external shocks with a minimum of disruption.

That said, the structure of the Canadian economy has evolved since 2002, and having a flexible exchange rate does not obviate the need for change. Here we arrive at the second point: the not-well-enough-known dynamism of the Canadian economy.

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The employment data published by Statistics Canada every month are for net changes in employment, and are measured in the tens of thousands. The gross changes of jobs being created and destroyed are an order of magnitude larger in scale. Roughly 150,000 Canadian workers — almost one employee in 100 — start new full-time private-sector jobs in a typical month, and a slightly smaller number either quit or are laid off. This churn is reflected in the data for job tenure: roughly 50% of these workers have been with their current employer for less than five years. If less than half of the workforce of 2020 is currently in place, then that gives us plenty of time to alter its composition.

The same for the stock of productive capital: buildings, machinery and equipment and so forth. Oil production is highly capital-intensive, and much of the boost to Canada’s GDP has come from the wave of investment in this sector, notwithstanding its modest increase in output. Investment flows add to the capital stock, but capital depreciates at an average annual rate of about 12%: if there were no new investment for the next five years, half of the existing capital stock would depreciate. In other words, half of the capital stock of 2020 has yet to be put in place.

Wikipedia tells me that the cells of the human skeleton are continually dying and being replaced, and is completely regenerated over a period of seven years. Although the analogy does not completely transfer to the Canadian economy, this is how we should be looking at the prospect of structural change. Half of the structure of the Canadian economy of 2020 has yet to be put into place. We have more than enough time to make the adjustments imposed by lower oil prices.

Congressional Republicans remain on track for their first major legislative victory of 2015. The push to green-light construction of the Keystone XL pipeline cleared its biggest procedural hurdle in the Senate on Monday, making its passage in the coming weeks all but inevitable. Republicans are in a win-win situation here: If U.S. President Barack Obama signs the bill into law, the GOP can point to the pipeline as proof they’re delivering on their campaign promises. If Obama vetoes, he hands Republicans ammunition to argue ahead of 2016 that it’s the Democrats who are responsible for Washington’s gridlock. Either way, the new GOP-controlled Congress will be off to a running start.

But politics isn’t always the zero-sum game it’s made out to be. A Republican victory on Keystone won’t preclude the President from finding one of his own. To do that, though, Obama will need to finally say once and for all whether he thinks the pipeline should be built. That question has become a high-profile litmus test in the larger climate debate — one the President has gone to great lengths to avoid taking for the past six years and counting.

On the rare occasion Obama has spoken publicly about the 2,700-kilometre pipeline, he’s been careful to make his veto threat about the process, not the pipeline. He has maintained that the State Department simply needs more time to weigh the economic pros against the environmental cons of a project that would carry 830,000 barrels of carbon-heavy crude per day from Alberta’s oil sands to Gulf Coast refineries. That wait-and-see approach has left Obama in an awkward position — one that’s drawn fire from pipeline supporters and opponents alike — but has arguably proved to be politically beneficial to date. But now that Republicans have the votes to pass their fast-tracking bill, the President can’t afford to hide behind the bureaucratic red tape of his own creation any longer.

Pipeline opponents argue that the project would significantly accelerate the development of oil sands, one of the dirtiest fossil fuels on the planet. Industry groups and their more business-focused friends, meanwhile, can’t imagine putting climate concerns above the nation’s near-term economic and national security interests. They contend that the oil deposits will be exploited one way or the other, so the United States might as well get in on the action.

So what should Obama do once the Keystone bill reaches his desk? He could try to trade his approval of the project for something else on his environmental wish list. As The New Yorker’s Ryan Lizza has pointed out, the pipeline makes for the perfect bargaining chip for Obama: It’s a top priority for Republicans’ but toward the bottom of the President’s list of concerns. While Obama’s clearly not a fan of the project, he also appears skeptical of climate advocates’ doomsaying when it comes to the pipeline’s construction.

The President, then, could offer his signature in exchange for something that is squarely on his own climate radar, be it a large green infrastructure project or protecting his climate regulations, like the new limits on methane emissions from the oil and gas industry his administration is unveiling this week, or the carbon limits on existing coal- and gas-fired power plants the White House hopes to finalize this summer. Green-lighting the pipeline might enrage environmentalists who have questioned the president’s commitment to slowing climate change, but any short-term outrage would be a small price to pay to protect U.S. Environmental Protection Agency (EPA) rules that will have a much larger impact on global emissions than the pipeline ever could — rules that Republicans have made clear they plan to target this year. Such a move would also keep alive the sliver of hope that the President and congressional Republicans might be able to work together during the next two years.

The other option for Obama would be to stop hiding behind the State Department review and just say he won’t approve the pipeline on its merits alone. While the project would have only a marginal impact on global emissions, the President could make a forceful case that every little bit matters in the larger fight to combat man-made global warming. He could also argue that the pipeline likely won’t create nearly as many jobs as its backers claim, and point to the fact that the current economics of oil could make the project largely moot.

By the EPA’s own estimates, the oil sands oil that would pump through the pipeline would add 18.7 million additional metric tonnes of carbon to the atmosphere each year than would be produced by conventional oil — a sliver of the 5.5 billion tonnes the United States was responsible for in 2011, the most recent year for which we have comprehensive international data. In the grand scheme of carbon emissions, then, coming out against the pipeline would be a largely symbolic gesture in place of the more pragmatic and wonky efforts that Obama has tended to opt for when it comes to the climate. He’d be sending what amounts to a rallying cry to the environmentalists and their climate-conscious allies, one that would be greeted with cheers from the left heading into next year’s UN climate convention in Paris, where the President will have to convince other world leaders that the U.S. government does not think that global warming is a hoax, despite what they are hearing from GOP leaders in Congress. Using his executive authority to kill the pipeline would also make it clear that, finally freed from electoral politics, Obama is serious about using every tool he has to go it alone on the climate.

Neither option would cancel out the Republicans’ short-term political gains from their Keystone vote, but either would help the president cement his long-term environmental legacy. The only way Obama can fail to capitalize on the long game that he has been playing on Keystone is to continue to take bureaucratic cover. Doing that would waste a golden opportunity to turn a surefire short-term political loss into a long-term policy victory.

Exploring the evidence about mankind’s use of fossil fuels so far, we have seen that the fossil fuel industry is far and away the world leader at producing cheap, plentiful, reliable energy and that that energy has radically increased our ability to create a flourishing society, a more livable climate, and greater environmental quality. On these fronts, so long as we are able to use fossil fuels, the evidence is overwhelming that life can get better and better across the board, as we use fossil fuel technology and other technologies to solve more problems — including those that fossil fuel technology and other technologies create.

One big question remains: What are the long-term prospects for this way of life? While today we are rich in fossil fuel resources and the wealth they help us create, what is in store for the future?

With so much consuming, can this way of life really last? Is it sustainable?

The answer is better than yes. Not only can our way of life last; it can keep getting better and better, as long as we don’t adopt “sustainability” policies.

Earlier, we saw that the amount of unused fossil fuel raw material currently in the Earth exceeds by far the amount we’ve used in the entire history of civilization by many multiples and that the key issue is whether we have the technological ability and economic reason to turn that raw material into a resource.

For years, actually centuries, opponents of fossil fuels — and some supporters of fossil fuels — have said that using fossil fuels is unsustainable because we’ll run out of them.

Instead, we keep running into them. The more we use, the more we create. Fossil fuel energy resources, as we discussed, are created — by turning a non-resource raw material into a resource using human ingenuity. And there is plenty of raw material left.

In the last few years, the shale energy revolution has unlocked vast new oil and gas resources, making the “running out of fossil fuels” claim seem implausible for the foreseeable future. Many environmental leaders have therefore shifted from saying that we’re running out of fossil fuels to saying that our abundance of fossil fuels is causing us to run out of other resources — arable land and water, most alarmingly, but also a whole host of other materials that are crucial for civilizations.

“Consuming three planets’ worth of resources when in fact we have one is the environmental equivalent of childhood obesity — eating until you make yourself sick,” says David Miliband, at the time secretary of state for the environment, food, and rural affairs in the United Kingdom. In response to criticisms of renewable energy plans as utopian and far-fetched, environmentalist Bill McKibben says, “Perhaps it’s the current scheme, with its requirement of endless growth in a finite world, that seems utopian and far-fetched.”

The theory behind these predictions is that Earth has a finite “carrying capacity,” an idea that was spread far and wide in the 1970s. Two of the leading exponents of this view were Paul Ehrlich and John Holdren. In their landmark book, Global Ecology, they wrote: “When a population of organisms grows in a finite environment, sooner or later it will encounter a resource limit. This phenomenon, described by ecologists as reaching the ‘carrying capacity’ of the environment, applies to bacteria on a culture dish, to fruit flies in a jar of agar, and to buffalo on a prairie. It must also apply to man on this finite planet.

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These theories were not idle banter — they were used by many to call for drastic restrictions on fossil fuel use, much as we have today.

Ehrlich and Holdren announced, “A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States.” This meant an attempt to reverse industrial development — by law: “This effort must be largely political.”

These ideas were viewed highly enough that Holdren’s body of work, which stresses these themes over and over, gave him the prestige to become science adviser to President Barack Obama.

As we’ve discussed earlier, these predictions were wrong, but why, exactly, were they wrong? The most direct reason is that there are far more fossil fuel raw materials and far more human ingenuity to get them than Ehrlich and Holdren expected. But there is a deeper error here, an error at the root of the whole concept of sustainability. The error is a backward understanding of resources.

The believers in a finite carrying capacity think of the Earth as something that “carries” us by dispensing a certain amount of resources. But if this was true, then why did the caveman have so few resources?

Those who believe in the ideal of human non-impact tend to endow nature with godlike status, as an entity that nurtures us if only we will live in harmony with the other species and not demand so much for ourselves.

But nature gives us very few directly usable machine energy resources. Resources are not ;taken from nature, but created; from nature. What applies to the raw materials of coal, oil, and gas also applies to every raw material in nature — they are all potential resources, with unlimited potential to be rendered valuable by the human mind.

Ultimately, a resource is just matter and energy transformed via human ingenuity to meet human needs. Well, the planet we live on is 100% matter and energy, 100% potential resource for energy and anything else we would want. To say we’ve only scratched the surface is to significantly understate how little of this planet’s potential we’ve unlocked. We already know that we have enough of a combination of fossil fuels and nuclear power to last thousands and thousands of years, and by then, hopefully, we’ll have fusion (a potential, far superior form of nuclear power) or even some hyper-efficient form of solar power.

The amount of raw matter and energy on this planet is so incomprehensibly vast that it is nonsensical to speculate about running out of it. Telling us that there is only so much matter and energy to create resources from is like telling us that there is only so much galaxy to visit for the first time. True, but irrelevant.

Sustainability is not a clearly defined term. According to the United Nations, it has over a thousand interpretations, but the basic idea is “indefinitely repeatable.” For example, the idea of renewability, which is usually synonymous with sustainability in the realm of energy, is that the fuel source keeps replenishing itself over and over without the need to do anything different.

But why is this an ideal? In most realms, we accept and desire constant change. For example, you want the best phone with the best materials, regardless of whether those materials will be there in 200 years and regardless of whether it would be more “renewable” to use two cups and a string.

Why would we use solar panels or windmills over and over if they keep giving us expensive, unreliable energy?

Why should we want to use solar panels or windmills over and over (leaving aside the fact that they quickly deteriorate and thus require a continuous series of mass-mining projects) if they keep giving us expensive, unreliable energy? Why not use the best, the most progressive form of energy at any given time, recognizing that this will change as we advance and the best becomes better?

At the beginning of this book, we observed that human beings survive by using ingenuity to transform nature to meet their needs — i.e., to produce and consume resources. And we observed that the motive power of transformation, the amplifier of human ability, the resource behind every other resource, is energy — which, for the foreseeable future, means largely fossil fuel energy. There is no inherent limit to energy resources — we just need human ingenuity to be free to discover ways to turn unusable energy into usable energy. This opens up a thrilling possibility: the endless potential for improving life through ever-growing energy resources helping create ever-growing resources of every kind. This is the principle that explains the strong correlation between fossil fuel use and life expectancy, fossil fuel use and income, fossil fuel use and pretty much anything good: human ingenuity transforming potential resources into actual resources — including the most fundamental resource, energy.

Growth is not unsustainable. With freedom, including the freedom to produce energy, it is practically inevitable. We are not eating the last slice of pizza in the box or scraping the bottom of the barrel; we are standing on the tip of an endless iceberg.

Growing up in Chevy Chase, Md., a suburb inside the Beltway of the D.C. metro area, I learned only one thing about fossil fuels in school for the first 18 years of my life: They were bad because they were causing global warming. It wasn’t very clear in my mind what warming was or how it worked, but the gist was this: The CO2 my parents’ SUV was spewing in the air was making the Earth a lot hotter, and that would make a lot of things worse.

Oh, and there was one more thing I learned: that everyone who knew the relevant science agreed with this.

Perhaps this would make a better story if I told you that I promptly joined Greenpeace and fought fossil fuels until discovering a massive hoax that I will reveal later in this chapter.

But that’s not quite how it went. As a young free-marketer, my 16-year-old self did not like all the talk of political restrictions that went along with global warming. So I wasn’t going anywhere near Greenpeace. But at the same time, the idea that this was a matter of established science was extremely significant to me. I come from a family of scientists (two of my grandparents were physicists, two were chemists) and I was being told about global warming not by scientifically illiterate teachers who repeated what they read in the paper (well, not only by those), but by my math and science teachers at the internationally renowned Math, Science, and Computer Science Magnet Program at Montgomery Blair High School.

My strongest memory from my senior year statistics class is of the time when my teacher, a very bright woman, stopped talking about statistics one day and started talking about the perils of global warming. That she brought it up in statistics class and that she was so adamant about it gave all of us the impression that this was an issue the scientifically minded should get involved with.

It was the same story at Duke. In freshman chemistry, local legend teacher James Bonk explained that the greenhouse effect was simple physics and chemistry and denounced the Republicans who denied it.

At that time, as I went searching for alternative views, I became familiar with the existence of professionals in climate science, such as Richard Lindzen of MIT and Patrick Michaels of the University of Virginia, who argued that global warming wasn’t the big deal it was made out to be.

What was I supposed to make of all this? Should I go by the more popular position? My science teachers had taught me that this, historically, was a recipe for failure, and that we should believe things only if someone can give compelling evidence for them.

But there was so much going on in discussions of global warming, I didn’t know how to decide where the evidence lay. I would hear different sides say different things about sea levels, polar bears, wildfires, droughts, hurricanes, temperature increases, what was and wasn’t caused by global warming, and on and on.

With such a mess to work with, I — like most, I think — tended to side with the scientists or commentators whose conclusions were more congenial to me. I will admit to reiterating the arguments of skeptics of catastrophic global warming with the lack of rigor I think is extremely common among believers. But I didn’t do this for long. I acknowledged that I didn’t really know what to think, and the idea that we might be making the Earth fundamentally uninhabitable scared me.

My greatest moments of clarity came whenever I discovered an author or speaker who, instead of giving his particular answer to the question of global warming, would try to clarify the questions. For example: “What exactly does it mean to believe in ‘global warming’?” Some warming or a lot? Little deal or big deal? A little man-made or a lot man-made? Accelerating or decelerating?

Having a background in philosophy, I recognized that most discussion of global warming would not stand up to 15 seconds of scrutiny by Socrates, who alienated fellow Athenians by asking them to define what they meant when they used terms vaguely. I think Socrates would have been all over anyone who spoke vaguely of global warming or climate change without making clear which version of that theory they meant: mild warming or catastrophic warming.

Once I got clearer on how to use experts as advisers, not authorities, and how to always keep in mind the big picture, I had a much better chance of getting the right answers to the right questions

A huge source of confusion in our public discussion is the separation of people (including scientists) into “climate change believers” and “climate change deniers” — the latter a not-so-subtle comparison to Holocaust deniers. “Deniers” are ridiculed for denying the existence of the greenhouse effect, an effect by which certain molecules, including CO2, take infrared light waves that the Earth reflects back toward space and then reflect them back toward the Earth, creating a warming effect. But this is a straw man. Every “climate change denier” I know of recognizes the existence of the greenhouse effect, and many if not most think man has had some noticeable impact on climate. What they deny is that there is evidence of a catastrophic impact from CO2’s warming effect. That is, they are expressing a different opinion about how fossil fuels affect climate — particularly about the nature and magnitude of their impact. Once I was clear on how unclear the questions we were asking were, I could ask better questions and get better answers. And once I got clearer on how to use experts as advisers, not authorities, and how to always keep in mind the big picture, I had a much better chance of getting the right answers to the right questions.

Given that our standard is human life — we want the climate we live in to be as livable as possible — there are two types of impacts we need to study and weigh. The first is the impact of CO2 on climate itself. CO2 affects climate in at least two ways: as a greenhouse gas with a warming impact, but also as plant food with a fertilizing impact (plants are a major part of the climate system as well as a benefit of a livable climate). I’ll refer to these as the greenhouse effect and the fertilizer effect. The second impact of CO2, which is rarely mentioned, is the tendency of cheap, plentiful, reliable energy from fossil fuels to amplify our ability to adapt to climate — to maximize the benefits we get from good weather and ample rainfall and minimize the risks from heat waves, cold snaps, and droughts. I’ll refer to this as the energy effect.

Discussion of climate change often assumes that any man-made climate change is large if not catastrophic and that our ability to adapt is not all that important. This is unacceptable. It is prejudicial to assume that anything is big or small, positive or negative, before we see the evidence. We have to actually investigate the facts. It might be that the greenhouse effect leads to a tiny, beneficial amount of warming or that having or not having fossil fuels to build sturdy infrastructure is the difference between 200 and 200,000 people dying in a hurricane.

Granted, acquiring evidence is often hard because of so many conflicting reports, which is why it’s so important to get experts to explain what they know and what they don’t know clearly and precisely.

The bottom line: For the three major climate impacts of fossil fuels — the greenhouse, fertilizer, and energy effects — we want to know how they work and how they affect us, all the while asking, “How do we know?”

National Post

]]>http://news.nationalpost.com/2014/12/23/alex-epstein-wrapping-our-minds-around-climate-change/feed/0stdclimateAlex Epstein: Making the world a better place — by using more fossil fuelshttp://news.nationalpost.com/2014/12/22/alex-epstein-making-the-world-a-better-place-by-using-more-fossil-fuels/
http://news.nationalpost.com/2014/12/22/alex-epstein-making-the-world-a-better-place-by-using-more-fossil-fuels/#commentsMon, 22 Dec 2014 12:07:13 +0000http://fullcomment.nationalpost.com/?p=171501

“You’re an environmentalist, right?” the girl, college age, asked me. It was 2009, in Irvine, Calif. I had stopped at a farmers’ market near my office for lunch, and she was manning a Greenpeace booth right next to it.

“Do you want to help us end our addiction to dirty fossil fuels and use clean, renewable energy instead?”

“Actually,” I replied, “I study energy for a living — and I think it’s good that we use a lot of fossil fuels. I think the world would be a much better place if people used a lot more.”

I was curious to see how she would respond — I doubted she had ever met anyone who believed we should use more fossil fuels. I was hoping that she would bring up one of the popular arguments for dramatically reducing fossil fuel use, and I could share with her why I thought the benefits of using fossil fuels far outweighed the risks.

But fossil fuels cause climate change, she might have said. I agree, I would have replied, but I think the evidence shows that climate change, natural or man-made, is more manageable than ever, because human beings are so good at adapting, using ingenuity and technology.

But fossil fuels cause pollution, she might have said. I agree, I would have replied, but I think the evidence shows that ingenuity and technology make pollution a smaller problem every year.

But fossil fuels are nonrenewable, she might have said. I agree, I would have replied, but I think the evidence shows that there are huge amounts of fossil fuels left, and we’ll have plenty of time to use ingenuity and technology to find something cheaper — such as some form of advanced nuclear power.

But fossil fuels are replaceable by solar and wind, she might have said. I disagree, I would have replied, because the sun and the wind are intermittent, unreliable fuels that always need backup from a reliable source of energy — usually fossil fuels, which is the only source of energy that has been able to provide cheap, plentiful, reliable energy for the billions of people whose lives depend on it.

But she didn’t say any of those things. Instead, when I said I thought that we should use more fossil fuels, she looked at me with wide-eyed disbelief and said, “Wow, you must make a lot of money.” In other words, the only conceivable reason I would say that our use of fossil fuels is a good thing is if I had been paid off by the fossil fuel industry.

Even though this wasn’t true, I understood why she thought it. It is conventional wisdom that our use of fossil fuels is an “addiction” — a short-range, unsustainable, destructive habit.

Without exception, anyone who lives a modern life is directly or indirectly using large amounts of fossil fuel energy — it is that ubiquitous

Eighty-seven percent of the energy mankind uses every second, including most of the energy I am using as I write this, comes from burning one of the fossil fuels: coal, oil or natural gas. Every time someone uses a machine — whether the computer I am using right now, the factory it was produced in, the trucks and ships that transported it, the furnace that forged the aluminum, the farm equipment that fed all the workers who made it or the electricity that keeps their lights on, their phones charged and their restaurants and hospitals open — they are using energy that they must be able to rely on and afford. And 87% of the time, that energy comes from coal, oil or natural gas. Without exception, anyone who lives a modern life is directly or indirectly using large amounts of fossil fuel energy — it is that ubiquitous.

But, we are told, this cannot continue.

While it might be convenient to drive gasoline cars and get electricity from coal in the short run, and while we might have needed them in the past, the argument goes, in the long run we are making our climate unlivable, destroying our environment and depleting our resources. We must and can replace fossil fuels with renewable, green, climate-friendly energy from solar, wind and biomass (plants).

This is not a liberal view or a conservative view; it’s a view that almost everyone holds in one form or another. Even fossil fuel companies make statements like the one the former CEO of Shell made in 2013: “We believe climate change is real and time is running out to take real action to reduce greenhouse gas emissions.” Former U.S. president George W. Bush was the person who popularized the expression “addicted to oil.” The debate over our addiction to fossil fuels is usually over how dangerous the addiction is and how quickly we can get rid of it — not whether we have one.

And the most prominent groups say we must get rid of it very quickly.

For years, the Nobel Prize-winning Intergovernmental Panel on Climate Change (IPCC) has demanded that the United States and other industrialized countries cut carbon dioxide emissions to 20%t of 1990 levels by 2050 — and the United States has joined hundreds of other countries in agreeing to this goal.

Every day, we hear of new predictions from prestigious experts reinforcing the calls for massive restrictions on fossil fuel use. As I write this, news about melting ice in West Antarctica is leading to dire predictions of sea level rises: “Scientists Warn of Rising Oceans from Polar Melt,” reports The New York Times; “Is It Too Late to Save Our Cities from Sea-Level Rise?” asks Newsweek, citing new research that “Miami and Manhattan will drown sooner than we thought.”

The message is clear: Our use of fossil fuels is going to destroy us in the long run, and we should focus our efforts on dramatically reducing it as soon as humanly possible.

So when the girl at the Greenpeace booth implied that I had sold my soul, I didn’t get offended. I simply explained that, no, I wasn’t being paid off; I had just concluded, based on my research, that the short- and long-term benefits of using fossil fuels actually far, far outweigh the risks and was happy to explain why. But she wasn’t interested. Pointing me to the Greenpeace pamphlets giving all the reasons fossil fuels are bad, she said, “So many experts predict that using fossil fuels is going to lead to catastrophe — why should I listen to you?” She made it clear that this wasn’t a real question and that the conversation was over.

Leading experts and the media have been making the exact same predictions for more than 30 years

But if she had wanted an answer, I would have told her this: I understand that a lot of smart people are predicting catastrophic consequences from using fossil fuels, I take that very seriously, and I have studied their predictions extensively.

And what I have found is this: Leading experts and the media have been making the exact same predictions for more than 30 years. As far back as the 1970s they predicted that if we did not dramatically reduce fossil fuel use then, and use renewables instead, we would be experiencing catastrophe today — catastrophic resource depletion, catastrophic pollution and catastrophic climate change. Instead, the exact opposite happened. Instead of using a lot less fossil fuel energy, we used a lot more — but instead of long-term catastrophe, we have experienced dramatic, long-term improvement in every aspect of life, including environmental quality. The risks and side effects of using fossil fuels declined while the benefits — cheap, reliable energy and everything it brings — expanded to billions more people.

National Post

Reprinted from THE MORAL CASE FOR FOSSIL FUELS by Alex Epstein with permission of Portfolio, a member of Penguin Group (USA) LLC, A Penguin Random House Company. Copyright (c) Alexander J. Epstein, 2014.

Out of the gate, the Energy East pipeline proposal followed the Keystone XL playbook, which is a textbook example of how not to get a pipeline built. TransCanada Pipelines and its political allies underestimated the challenges that face them. When the premiers of Ontario and Quebec recently spelled out their conditions for supporting Energy East, which accurately captured the general sentiments in their provinces, what was the initial response? A shrill lecture from Saskatchewan premier Brad Wall and a lot of noise about nation-building and whatnot. Fortunately, New Brunswick premier Brian Gallant and Alberta premier Jim Prentice urged everyone to listen and engage constructively with one another, and TransCanada ditched the rubbish advice they received from their Keystone advisors.

Fact is, Energy East is not an easy sell. Millions of Ontarians and Quebecers live along or near the proposed route of Energy East, and must be persuaded it is in their direct interests. It is not the rural west where spiderwebs of underground transport pipelines can spread anonymously. If people are uneasy about having a pipeline pass near their homes or cross their local waterways, that’s a legitimate concern. Politician’s lectures, pro-pipeline ads on hockey websites, and pre-packaged “information sessions” won’t make that concern go away.

TransCanada launched its Energy East proposal just as easterners were firing up their natural gas-fuelled furnaces for the first cold autumn nights. Bad timing. Canadians loathe their first winter gas bills. Natural gas companies jumped all over it, warning Energy East will increase consumers’ bills. Will it? Maybe not, but Ontarians still irked by those cancelled natural gas-fired electricity plants don’t want to hear anything that might raise energy costs further.

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The challenges in Quebec are greater still. Outside coastal British Columbia, there is no stronger and well-established environmental movement than in Quebec. It is not led by aging hippy followers of David Suzuki, but by politically savvy young urbanites. In the rest of Canada, people under 30 are remarkably apathetic about environmental politics. In Quebec, larger numbers care very much about things like global warming. Energy East gives them leverage over the oil sands they haven’t had before. They will use it effectively.

Laugh if you wish, but the St. Lawrence River’s belugas, with their charmingly comical smiles, could also sink Energy East. Not only are belugas already threated by pollution, they are beloved (ask any kid who’s heard Raffi sing), and they generate $80 million annually in whale-watching income for small communities. TransCanada is rethinking its proposed Quebec port facility, and promises to come up with plans that minimize the potential harm to belugas. But Quebecers trust science over promises of oilmen and politicians, and Quebec-based scientists say the belugas would be at risk.

How to overcome these and other challenges? First, listen — actually listen — to what Ontarians and Quebecers say about Energy East. I don’t mean through the consultation processes required by the National Energy Board or canned information sessions. TransCanada executives must actively reach out to local community groups, environmentalists, students and First Nations.

Don’t hard-sell the pipeline. Ask people what is needed to win their trust and support, and try to deliver

Leave the neckties and PR handlers at the airport, put on khakis, and go meet the people the way would-be presidents go to Iowa. Get local church groups and community service clubs to provide the refreshments. Do little talking, and lots of listening. Don’t hard-sell the pipeline. Ask people what is needed to win their trust and support, and try to deliver. They must see there are tangible benefits for them. Follow up afterwards; don’t breeze into town and never reappear. Some people may never support Energy East, but they’ll respect the fact they were asked properly and politely, and in Canada that can go a long way.

Most importantly, tackle the elephant in the room. Canada needs a national strategy to put a price on carbon and to cap our greenhouse gas emissions. Sooner or later it will happen, whether or not energy companies or our federal government like it. Quebec has already joined California and other U.S. states in carbon pricing arrangements under the Western Climate Initiative. Ontario’s greenhouse gas emissions were once worse than Alberta’s, but fell once it mothballed coal-fired electricity plants. Energy East could be a catalyst for a new partnership between eastern and western Canada to manage carbon pollution, or it could become a wedge. If TransCanada uses its political influence to get progress on carbon cap-and-trade, it will get its new pipeline.

Ontarians and Quebecers are reasonable folk. Show how we can make this work in an economically desirable and environmentally sustainable way and we’ll listen.

National Post

Robert McLeman is an associate professor in the department of geography & environmental studies at Wilfrid Laurier University.

Late last month, the premiers of Quebec and Ontario ripped a page right out of B.C. Premier Christy Clark’s old playbook when they set conditions that must be met if they are going to support oil pipelines. But, if premiers Philippe Couillard and Kathleen Wynne want to turn those demands into dollars and jobs for their provinces, they will need to transition quickly to Clark’s new playbook.

Clark’s old playbook was written in advance of a highly contentious election in British Columbia, when the premier needed to demonstrate that she would be the chief defender of the province’s interests. She crafted five conditions and demanded that they be met if proponents of oil pipelines wanted the support of the B.C. government.

The five conditions did the job; she became the chief defender of B.C.’s interests while maintaining a focus on the economy, and that helped to get her elected. But, in the process, the fifth condition (a demand for increased economic benefit to B.C.) led to great acrimony with former Alberta premier Alison Redford and her government. Since then, the big challenge has been finding a way to rebuild the relationship to the benefit of both provinces.

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Clark’s new playbook has her working quietly and constructively with her counterparts, as she did during a recent meeting of the New West Partnership (NWP) premiers (Saskatchewan, Alberta and B.C.) and western industry leaders hosted by Premier Brad Wall in Regina. Premiers and industry leaders met to figure out a better way to get western Canadian goods to market.

It is good news for the country that the three western premiers agreed on tangible actions to improve access to markets and create jobs. This type of collaboration is (and will be) critical to breaking Gordian knots that happen in the federation from time to time. And we have reason to be hopeful that the momentum of collaboration will make it easier to find a solution to B.C.’s troublesome fifth condition.

The premiers instructed the Pacific Gateway Alliance (which was expanded to include ministerial representation from the three western provinces) to devise a cost-sharing partnership with the federal government (to the tune of $1-1.5 billion) and the private sector to maximize Canada’s export capacity.

The federal government’s $5.8-billion infrastructure announcement this week reinforces its willingness to spend in areas that will shore up this critical narrative leading up to the election

The Pacific Gateway Alliance was also tasked with creating a report by May 2015 (shortly before the next federal election) identifying key projects which must include high-volume marine ports and rail and pipeline systems. They emphasized that future infrastructure planning and development must include the following key components: world-class environmental and safety performance; reduced negative impact on local communities; and the engagement of aboriginal peoples. All of this helps Clark make her case to British Columbians — and backstops the five conditions with real action.

The infrastructure ask should be welcomed by a federal government facing an election in which the Conservative party’s preferred ballot question focuses on the economy, resource development, infrastructure and trade. The recent challenges to western market access for energy are a threat to this narrative. Clearly, the federal government’s $5.8-billion infrastructure announcement this week reinforces its willingness to spend in areas that will shore up this critical narrative leading up to the election.

The government will be even more likely to provide the money if it helps to secure B.C.’s support for oil pipelines and efficient access to critical Asian markets. If the ask is successful and the Pacific Gateway Alliance skillfully includes infrastructure projects (primarily in B.C.) that benefit all three western provinces, then Clark will have delivered for British Columbians and potentially satisfied the stubborn fifth condition.

Meanwhile in Ontario and Quebec, Wynne and Couillard are just starting the game — they, too, are casting themselves as the chief defenders of their provinces’ interests. If they want to get in on a deal that brings significant economic benefit to their provinces, they need to find a way to move quickly from the demand phase to the co-operation phase.

The NWP premiers have demonstrated that they know the way and have paved the path. Wynne and Couillard need to get into Clark’s new playbook soon and team up with Saskatchewan and Alberta — provinces led by premiers who know the way.

National Post

Trevor McLeod is the director of the Centre for Natural Resources Policy at the Canada West Foundation. Cwf.ca

Plans for TransCanada’s Energy East pipeline, which will move Alberta and Saskatchewan conventional oil to Atlantic Canada for refining while eliminating the need for eastern Canada to import foreign oil, are prompting considerable national debate. The National Energy Board is conducting a full review of the proposal, as it is mandated to do.

We in Saskatchewan support the Energy East proposal. The project will generate significant economic activity, create jobs and increase tax revenue — particularly in Ontario and Quebec.

Energy East has been described as the largest pipeline project in Canada in over 50 years. An existing gas pipeline with excess capacity will be repurposed to move Western Canadian oil to refineries in eastern Canada. Two-thirds of the pipeline is already in the ground. A pair of comprehensive analyses — one by Deloitte, the other by the Conference Board of Canada — both point to the substantial benefits TransCanada’s plan will achieve.

The Deloitte report projects $35-billion in additional GDP activity over the life of the project. Of that, $6.3-billion will be seen in Quebec and $13-billion in Ontario. As TransCanada notes, that’s roughly the same as the contribution made by the auto sector. Deloitte also projects about $10-billion in additional tax revenues over the lifetime of the project. Of that, Quebec will receive 20% cent of that total, Ontario 80%.

It is also estimated that Energy East will create 10,000 full time jobs in a construction phase lasting six years, once again mostly in Eastern Canada.

Energy East is in the very initial stages of its National Energy Board review. During that review, these estimates will be subjected to scrutiny and interested parties from across the country will be invited to contribute. A $2.5-million fund has also been set up to assist those who wish to appear but do not have the means to do so.

Public hearings have already taken place here in Saskatchewan and across the country. Energy East has already talked to 5,500 land owners. Consultations have been held with 155 First Nations and Métis communities, and agreements have already been signed with 56 of those communities.

However, despite the obvious benefits and the NEB process, Ontario and Quebec have announced a joint position that at best moves the goal posts for approval and at worst lays out new barriers. A motion from the Quebec National Assembly asks for the assessment of “upstream” greenhouse gas (GHG) emissions to be considered during the review of the project.

This request is unprecedented. In its most recent ruling on the Northern Gateway proposal, the National Energy Board ruled — correctly, from Saskatchewan’s point of view — that environmental impacts should focus on the pipeline infrastructure itself.

To me, this is only common sense. Western Canadian oil arriving via the new Energy East pipeline would be replacing offshore oil from places like Algeria, Iraq and the United States. Whatever GHGs might have been attendant to the consumption of foreign oil in eastern Canada will be notionally the same. Why, then, have we never heard Ontario or Quebec sounding concerns about the upstream GHG emissions from the oil currently being imported, refined and consumed in eastern Canada? It could even be argued that there may be a net benefit, given that light, sweet crude from the Bakken Formation would be replacing heavier, more carbon-intensive grades from places like Venezuela.

Energy East is a $12-billion boost to the Canadian economy, providing jobs, economic growth and increased tax revenue for government. It would save millions of dollars now spent on foreign oil, reducing the costs to refineries and, inevitably, their customers. Those jurisdictions placing obstacles in its path are the very ones who would benefit the most.

Here in Saskatchewan, in addition to the jobs and economic activity, Energy East would provide the on-ramp for Bakken oil into the TransCanada system — something that is sorely needed. It would allow Saskatchewan people to get the best possible price for our resources. It would help us to continue to create opportunity and jobs and to contribute to the federal tax base that supports Ontario and Quebec through equalization to the tune of $11-billion combined.

Canada should aspire to be the most responsible energy superpower in the world. We first need to ensure that proposals to move oil across the country to maximize value of the resource for Canadians and facilitate valued added right here at home are not subject to unwarranted, politically motivated barriers.

As recently as Al Gore’s Nobel Peace Prize in 2007, it was expected that energy policy would be increasingly dominated by environmental questions. In 2001, one of largest companies on the planet, British Petroleum, rebranded itself as BP and adopted a new slogan: Beyond Petroleum. It was massively successful in persuading customers of BP’s enviro-credibility until the 2010 Deepwater Horizon spill in the Gulf of Mexico. Figuring the game was up on pretending to be something it wasn’t, BP got out of the solar energy business entirely in 2011, and quietly exited wind power in 2013. It decided to go back to oil and gas. The future of energy was the past.

Indeed, the whole world is going back to petroleum, abandoning fanciful notions of going beyond it. And the ethical questions that dominate the energy sector are now also from the past. Consider recent news from Canada.

The federal Cabinet decision at the beginning of the summer to approve the Northern Gateway pipeline project took us back some four decades. The idea of pipelines across the Canadian north was raised in the 1970s, prompting a royal commission into the Mackenzie Valley project, led by Thomas Berger. The Berger commission reported in 1977, recommending a 10-year moratorium on a project that still has not been built. The conditions on the Northern Gateway imposed by the federal government, and promises of legal action to block the project by some aboriginal groups, bring the issues of the 1970s back again. Energy policy in Canada used to be dominated by relations between the Crown, corporations and aboriginals. It is again.

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This month Petronas, the national energy behemoth of Malaysia, announced that their planned liquefied natural gas (LNG) terminal in northwest British Columbia might be delayed by 10 to 15 years if — not to put too fine a point on it — the federal and provincial governments did not fork over more cash. Again, here come the 1970s and 1980s, when energy megaprojects were the subject of complex negotiations between competing levels of government (see the National Energy Program) and corporations looking to maximize the taxpayer contribution. Economic policy in Canada has always involved government in the protection of manufacturing — witness the auto bailout of a few years ago. Now it is concessions to the energy industry that raise a whole raft of ethical issues about redistribution and the equity of energy policy.

Ethical concerns are back in a big way. Ezra Levant’s book Ethical Oil made the case explicitly that the ethics of the political regimes in oil-producing countries should be taken into account, and that the Americans and Europeans ought to prefer Canadian energy to Saudi Arabian energy for that reason. The term “blood oil” never caught on like “blood diamonds,” but what Levant argued is increasingly being taken into account. It is petro-dollars that literally fuel the new “Islamic State”; voices protesting religious persecution have increasingly advocated trying to cut off the energy revenues that ISIS depends upon.

. American energy independence is now a possibility due to fracking. The economic possibility of not buying foreign oil now means a more robust ethical case for not doing so

Ethics of supply is closely related to the granddaddy issue of the 1970s energy policy — energy security and independence. For more than 40 years American policy has favoured decreasing reliance on Middle Eastern oil, but precious little progress was made until the recent technological revolution in shale oil and gas recovery. American energy independence is now a possibility due to fracking. The economic possibility of not buying foreign oil now means a more robust ethical case for not doing so.

The decision this week by the European Union to shelve its plans to label the Canadian oil sands “dirty energy,” ineligible for import, is due to the realization that the alternative — Russian oil and gas — is directly funding the war in Ukraine, and advancing the cause of tyranny. In this case, the ethical question and the geopolitical security question are the same: It is right to buy energy from Russia?

A moral question requires there to be an option for alternative action — the moral law cannot require an impossibility. The increase in energy reserves from democratic countries brings the ethical question to the fore in a manner that was not possible in the 1970s. In the face of returning concerns from years past, the environmental question, so prominent in the 1990s and 2000s, is likely to return to the secondary role it played in the 1970s too.

Energy policy, ethics and security appear likely to dominate the global agenda for the foreseeable future, and the future looks very much like the past.

On Oct. 14, the winner of the $60,000 Hilary Weston Writers’ Trust Prize for Nonfiction will be announced in Toronto. In anticipation of this award, the National Post presents excerpts from all five nominated books this week. Today’s excerpt is taken from This Changes Everything: Capitalism vs. the Climate, by Naomi Klein.

On a drizzly British Columbia day in April 2012, a 27-seat turbo-prop plane landed at the Bella Bella airport, which consists of a single landing strip leading to a clapboard building. The passengers descending from the blue-and-white Pacific coastal aircraft included the three members of a review panel created by the Canadian government. They had made the 480-kilometer journey from Vancouver to this remote island community, a place of deep fjords and lush evergreen forests reaching to the sea, to hold public hearings about one of the most contentious new pieces of fossil fuel infrastructure in North America: Enbridge’s proposed Northern Gateway pipeline.

Bella Bella is not directly on the oil pipeline’s route (that is 200 kilometers even further north). However, the Pacific ocean waters that are its front yard are in the treacherous path of the oil tankers that the pipeline would load up with diluted tar sands oil — up to 75% more oil in some supertankers than the Exxon Valdez was carrying in 1989 when it spilled in Alaska’s Prince William Sound, devastating marine life and fisheries across the region. A spill in these waters could be even more damaging, since the remoteness would likely make reaching an accident site difficult, especially during winter storms.

The appointed members of the Joint Review Panel — one woman and two men, aided by support staff — had been holding hearings about the pipeline impacts for months now and would eventually present the federal government with their recommendation on whether the project should go ahead. Bella Bella, whose population is roughly 90% Heiltsuk First Nation, was more than ready for them.

A line of Heiltsuk hereditary chiefs waited on the tarmac, all dressed in their full regalia: robes embroidered with eagles, salmon, orcas, and other creatures of these seas and skies; headdresses adorned with animal masks and long trails of white ermine fur, as well as woven cedar basket hats. They greeted the visitors with a welcome dance, noisemakers shaking in their hands and rattling from the aprons of their robes, while a line of drummers and singers backed them up. On the other side of the chain-link fence was a large crowd of demonstrators carrying anti-pipeline signs and canoe paddles.

Standing a respectful half step behind the chiefs was Jess Housty, a slight 25-year-old woman who had helped to galvanize the community’s engagement with the panel (and would soon be elected to the Heiltsuk tribal council as its youngest member). An accomplished poet who created Bella Bella’s first and only library while she was still a teenager, Housty described the scene at the airport as “the culmination of a huge planning effort driven by our whole community.”

And it was young people who had led the way, turning the local school into a hub of organizing. Students had worked for months in preparation for the hearings. They researched the history of pipeline and tanker spills, including the 2010 disaster on the Kalamazoo River, noting that Enbridge, the company responsible, was the same one pushing the Northern Gateway pipeline. The teens were also keenly interested in the Exxon Valdez disaster since it took place in a northern landscape similar to their own. As a community built around fishing and other ocean harvesting, they were alarmed to learn about how the salmon of Prince William Sound had become sick in the years after the spill, and how herring stocks had completely collapsed (they are still not fully recovered, more than two decades later).

The students contemplated what such a spill would mean on their coast. If the sockeye salmon, a keystone species, were threatened, it would have a cascade effect — since they feed the killer whales and white-sided dolphins whose dorsal fins regularly pierce the water’s surface in nearby bays, as well as the seals and sea lions that bark and sunbathe on the rocky outcroppings. And when the fish return to the freshwater rivers and streams to spawn, they feed the eagles, the black bears, the grizzlies, and the wolves, whose waste then provides the nutrients to the lichen that line the streams and riverbanks, as well as to the great cedars and Douglas firs that tower over the temperate rainforest. It’s the salmon that connect the streams to the rivers, the river to the sea, the sea back to the forests. Endanger salmon and you endanger the entire ecosystem that depends on them, including the Heiltsuk people whose ancient culture and modern livelihood is inseparable from this intricate web of life.

Bella Bella’s students wrote essays on these themes, prepared to present testimony, and painted signs to greet the panel members. Some went on a 48-hour hunger strike to dramatize the stakes of losing their food source. Teachers observed that no issue had ever engaged the community’s young people like this — some even noticed a decline in depression and drug use. That’s a very big deal in a place that not long ago suffered from a youth suicide epidemic, the legacy of scarring colonial policies, including generations of children — the great-grandparents, grandparents, and sometimes the parents of today’s teens and young adults — being taken from their families and placed in church-run residential schools where abuse was rampant.

Housty recalls, “As I stood behind our chiefs [on the tarmac], I remember thinking how the community had grown around the issue from the first moment we heard rumblings around Enbridge Northern Gateway. The momentum had built and it was strong. As a community, we were prepared to stand up with dignity and integrity to be witnesses for the lands and waters that sustained our ancestors — that sustain us — that we believe should sustain our future generations.”

After having flown in for the meetings, the review panel members suddenly cancelled. One man slapping their van’s window had made them feel unsafe

After the dance, the panel members ducked into a white minivan that took them on the five-minute drive into town. The road was lined with hundreds of residents, including many children, holding their handmade poster-board signs. “Oil Is Death,” “We Have the Moral Right to Say No,” “Keep Our Oceans Blue,” “Our Way of Life Cannot Be Bought!,” “I Can’t Drink Oil.” Some held drawings of orcas, salmon, even kelp. Many of the signs simply said: “No Tankers.” One man thought the panel members weren’t bothering to look out the window, so he thumped the side of the van as it passed and held his sign up to the glass.

By some counts, a third of Bella Bella’s 1,095 residents were on the street that day, one of the largest demonstrations in the community’s history. Others participated in different ways: by harvesting and preparing food for the evening feast, where the panel members were to be honoured guests. It was part of the Heiltsuk’s tradition of hospitality but it was also a way to show the visitors the foods that would be at risk if just one of those supertankers were to run into trouble. Salmon, herring roe, halibut, oolichan, crab, and prawns were all on the menu.

Similar scenes had played out everywhere the panel traveled in British Columbia: Cities and towns came out in droves, voicing unanimous or near unanimous opposition to the project. Usually First Nations were front and centre, reflecting the fact that the province is home to what is arguably the most powerful indigenous land rights movement in North America, evidenced by the fact that roughly 80% of its land remains “unceded,” which means that it has never been relinquished under any treaty nor has it ever been claimed by the Canadian state through an act of war.

Yet there was clearly something about the passion of Bella Bella’s greeting that unnerved the panel members. The visitors refused the invitation to the feast that evening, and chief councillor Marilyn Slett was put in the unenviable position of having to take the microphone and share a letter she had just received from the Joint Review Panel. It stated that the pipeline hearings, for which the assembled crowd had all been preparing for months, were cancelled. Apparently the demonstration on the way from the airport had made the visitors feel unsafe and, the letter stated, “The Panel cannot be in a situation where it is unsure that the crowd will be peaceful.” It later emerged that the sound of that single man thumping the side of the van had somehow been mistaken for gunfire. (Police in attendance asserted that the demonstrations had been nonviolent and that there was never any security threat.)

Housty said the news of the cancellation had a “physical impact. We had done everything according to our teachings, and to feel the back of someone’s hand could hardly have been more of an insult.” In the end, the hearings went ahead but a day and a half of promised meeting time was lost, depriving many community members of their hope of being heard in person.

What shocked many of Bella Bella’s residents was not just the weird and false accusation of violence; it was the extent to which the entire spirit of their actions seemed to have been misunderstood. When the panel members looked out the van window, they evidently saw little more than a stereotypical mob of angry Indians, wanting to vent their hatred on anyone associated with the pipeline. But to the people on the other side of the glass, holding their paddles and fish paintings, the demonstration had not primarily been about anger or hatred. It had been about love — a collective and deeply felt expression of love for their breathtaking part of the world.

When the federal government gives its official approval to the Northern Gateway pipeline project this week — as it almost certainly will — the decision will cap a process that began a decade ago, when Enbridge Inc. first proposed to build a 1,200-km long twin pipeline from Bruderheim, Alta., to the coast at Kitimat, B.C. Natural gas condensate will run inland, while the outbound pipeline will ship diluted Asia-bound bitumen from the oil sands.

With oil sands production booming, Western Canada badly needs more pipeline capacity. As the Financial Post reported earlier this month, it is projected that shipments of oil by rail from Western Canada will more than triple between now and 2016. In the first quarter of 2014, rail cars moved about 400,000 barrels per day. By 2016, that number will be about 1.4-million.

This represents a completely wasteful bottleneck in Canada’s energy supply chain. Rail transport of oil is more dangerous than pipeline transport (as the Lac-Mégantic tragedy showed us, all too dramatically), requires more energy inputs, and diverts rail capacity from traditional applications such as grain transport. We have known about this looming oil-transport crunch for years, and it is a disgrace that Canadian authorities and regulators (not to mention the U.S. administration, which has stalled for several years on Keystone XL) have neglected pipeline needs to such a point that our companies must now resort to 19th-century methods to ship their product.

Northern Gateway’s critics are correct to point out that the pipeline would run across some of Canada’s most pristine and beautiful landscape. But the state-of-the-art project would feature a host of redundant safeguards against any environmentally significant spill. And the entire project has been exhaustively studied by a Joint Review Panel convened under the auspices of the National Energy Board. The farthest thing from an oil-industry shill group, this panel considered everything from environmental stewardship to aboriginal community outreach. (Enbridge is consulting with any First Nation group with even the most tenuous and dubious geographical claim to the use of lands within 80km, on either side, of the planned pipeline.) Transport Canada, Fisheries and Oceans, Indian and Northern Affairs and Environment Canada all have a role as responsible authorities.

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Late last year, the Review Panel approved the $7.9-billion project, contingent on Enbridge meeting 209 conditions, spelled out over 429 pages. The result will be one of the safest, most closely overseen pipeline construction projects in the industry’s history. Given the massive shortage of pipeline capacity — and the fact that the ensuing oil transport by rail produces results that even environmentalists should find detestable — the need to approve this project should be completely obvious.

But there are worrying signs that the project will be held up anyway. Despite the exhaustive consultation process, environmental and First Nations groups are trying to jawbone the project to death through endless follow-up community consultations. Populist politicians in B.C. are thinking up ways to kill the project through cynical denials of regulatory approval. And a new plan is afoot to kill the pipeline project through a long-shot provincial referendum.

As a giant player in this crucially important area of global trade, we should do everything in our power to ensure that we can respond nimbly to market trends

In the long run, none of these obstructionist tactics is likely to work: Canada is producing more oil, and it is inevitable that we will find a way to get it to growth markets in Asia through the safest and cheapest methods available to us — i.e., pipelines. The only question is how long the process will take, how much money will be wasted on endless environmental litigation, and how much risk we will impose, in the meantime, on railway-served communities that have oil cars lumbering daily through their downtowns.

Whatever becomes of the Northern Gateway project, the whole episode shows that Canadian energy policy is broken in this area. As a giant player in this crucially important area of global trade, we should do everything in our power to ensure that we can respond nimbly to market trends — such as the boom in oil demand on the other side of the Pacific. Instead, we are mired in a system in which every aboriginal reserve and left-wing feather-and-drum-circle Facebook group can force delays in needed inter-provincial infrastructure projects.

For the good of our country, and its most important growth industry, that has to change.

Full Comment’s Araminta Wordsworth brings you a daily round-up of quality punditry from across the globe. Today: To nobody’s huge surprise, people in Crimea voted to return to Russia.

But the referendum raises more questions than it answers. Why did Vladimir Putin need such Soviet-style unanimity? Turnout was reportedly 80%, or whom 95.7% voted to secede. These seem unbelievably high figures, reminiscent of Kim Jong-un’s North Korea, rather than a western democracy. Also, why the rush?

Ratification by plebiscite is, of course, a favoured tactic of dictators. Look at the four held by Hitler that were used to justify new powers or territory grabbed by the Führer, such as annexing Austria.

While Putin has tapped Russian nationalism to win support for the move, commentators suggest his long-term motivation is far more ambitious. Southern and eastern Ukraine beckons, as do rich energy resources in the Black Sea.

According to an editorial in The Guardian, the Crimean vote is irrelevant — but also important.

The referendum that took place in Crimea is both irrelevant and deeply significant. Irrelevant because it has no standing in the law of the country to which it applies, and because it took place while the autonomous region was under military occupation. International bodies are unlikely to recognize its outcome: the UN Security Council voted by 13-1 to condemn it on Saturday, with only Russia voting against.

The referendum is significant, however, because it represents a giant step on the road to Russian annexation, and because it reveals a little more of the nature of that country’s president, Vladimir Putin.

In Russia, it’s being played a historic triumph and joy is unconfined — for now. Here is a sampling, courtesy of the Press Trust of India.

“Someone may not like it but we are happy,” Izvestia newspaper quoted one voter as saying on its front page, next to a picture of smiling and clapping Crimeans.

“Yesterday Crimea made its choice — it wants to be part of Russia,” said Rossiiskaya Gazeta, the official government newspaper.

Michael Bohm at the independent Moscow Times believes the real question is whether Putin will stop with Crimea.

The Russians have a saying: “Appetite comes with eating.” As soon as Putin starts devouring a chunk of Ukraine and really savouring it, the more Ukrainian territory he will want …

The imperial euphoria over annexing Crimea will probably last for a month or two. But after that, Russians will feel the high cost of U.S. and European sanctions, a continued drop in the ruble — increase in prices for food and other imported goods and capital flight. At some point, ordinary Russians who are far removed from Crimea will ask themselves whether Putin’s imperial ambitions are really worth the economic cost, estimated at $5-billion a year.

Why is a world leader prepared to risk personal opprobrium, his country’s isolation, and, possibly, crippling economic sanctions for an obscure piece of land?

[P]ropaganda aside, perhaps the answer is more simple: oil and gas. By annexing Ukrainian land on the Black Sea coast, Putin also annexes the rights to any hydrocarbons found in its maritime zones. There are signs the Black Sea contains a lot of wealth … According to some Kremlin insiders, the Crimea operation has been six years in the planning.

The Crimean result also poses problems for the world’s other autocratic power. China is cautiously supporting the vote, though the referendum ploy sets an alarming precedent for Beijing. In a piece in the South China Morning Post, Paul Letters notes,

But it’s the principle rather than the result that matters to China, which seeks friendly relations with both nations. China’s relationship with Ukraine includes the lease of 5% of the latter’s territory — a sizeable area — for agriculture. Regarding arms exports, China is Ukraine’s biggest customer, but Russia is one of China’s biggest suppliers, not to mention its key ally in the UN Security Council …

Russia’s occupation of a foreign nation presented China with a diplomatic quandary, but a vote which allows self-determination will bring Beijing greater discomfort. Were such an idea to spread, China would have a lot to lose — Xinjiang, Tibet, Inner Mongolia — and nothing to gain: Taiwanese mistrust is not about to disappear.

Stephen Harper heads to Mexico to meet with Barack Obama next week as part of the North American Leaders’ Summit but, according to the man some believe will lead the Conservative Party one day, he may as well stay home.

Jim Prentice — the former minister of Indian affairs, environment, and industry — was in Ottawa Wednesday talking energy and the environment. He left politics more than three years ago to join CIBC as vice-chairman but is still mentioned as a potential candidate for the Tory leadership, should the job become vacant. (For the record, when I asked him about his leadership ambitions recently, he said he had closed the door on politics when he left Ottawa.)

His message to a power crowd at the Economic Club was that Canada needs to look beyond Mr. Obama if it wants to see progress on the energy file. He said he remains confident the Keystone pipeline will be approved but is less optimistic that it will be on the watch of this president.

He said his experience is that the opportunity to transform the bilateral relationship with the United States comes during the first six to 18 months of a new president’s mandate. “More than a year ago, I gave a speech and talked about how challenging it would be to get the attention of the Americans during Obama’s second term – a term that from the outset seemed destined to be focused on internal issues. That has proven to be true in spades. The course of the next few years appears to be set …. Canada’s next opportunity to directly engage the U.S. in a profound, substantive and meaningful way will not come until 2017,” he said.

By that time, Canada needs to have achieved west coast access for its oil and natural gas, so that it is not reliant on the U.S. as its only customer, he said.

“We need to be a forceful partner with alternative [markets], so that we’re not dependent and supplicant to a U.S. marketplace that is over-supplied.”

Without access to export markets in Asia, Canada’s energy revolution could stall, he said.

“Without it, we are heading towards a reality in which there is no market for increased oil sands production beyond 2020,” he said, pointing to discounts of up to 40% on the world oil price received by Canadian producers because of periodic production gluts. This week’s budget suggested that Canadian exports would be $7.1-billion a year higher, if Canadian crude prices kept pace with world prices.

‘I’m adamant about this. I don’t think we should impose carbon charges on Canadian industry unilaterally… The U.S. is not imposing costs on its industry, so why should we?’

The CIBC vice-chair suggested that success in reaching tidewater with a pipeline would give Canada leverage when it comes to confronting worrying policy trends such as emergence of state level fuel standards, designed to keep oil sands oil from the American market.

Mr. Prentice’s view is similar to the one expressed by Mr. Harper during an interview in the U.S. when he said he “won’t take no for an answer,” if Mr. Obama denies the Keystone project his approval. Mr. Harper was widely mocked but his essential point was that Canada will keep pushing for approval under the next president, if it is turned down by the incumbent.

Mr. Prentice’s position on pricing carbon also appears close to that of the Prime Minister, even if he is more willing to elaborate than Mr. Harper.

The Conservatives have long promised oil and gas regulations — and failed to deliver. Mr. Prentice is sympathetic to the lack of action.

“I’m adamant about this. I don’t think we should impose carbon charges on Canadian industry unilaterally just to show good faith at the table with the Americans. The U.S. is not imposing costs on its industry, so why should we?”

Chris Roussakis/National Post<strong>By Linda Nguyen</strong>
TORONTO — Harassing phone calls made during the last federal election by people claiming to represent Liberal candidates suggest a “pattern of wrongdoing and misbehaviour” that needs to be fully investigated, interim Liberal leader Bob Rae said Saturday.
“Dirty tricks are not permissible at anytime. They are not permissible in election campaigns,” he said in Toronto.
“They are not permissible at any time because they absolutely corrupt democracy. They corrupt free choice and they corrupt people’s ability to make a choice and do the right thing.”
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Flanked by supporters and MPs holding placards that read “No Dirty Tricks, Mr. Harper,” Rae said he believes the calls were not the actions of one person, but a concerted effort by a group of individuals targeting Liberal candidates.
“It just isn’t good enough for the Conservatives to say they didn’t know anything about it,” he said. “That defies all credibility. The notion that one person would be responsible for these robocalls.”
On Friday, <em>Postmedia News</em> and the <em>Ottawa Citizen</em> reported to find evidence of a “systematic voter-suppression campaign” against Liberals in tight ridings during last May’s federal election.
Automated messages reportedly told voters that their polling stations had been changed or directed them to non-existent stations.
The campaign also allegedly consisted of harassing phone calls targeting Liberal voters in 14 ridings — the majority of which were in southern Ontario.
Liberal supporters say the calls usually came late at night or early in the morning from people claiming to represent the local Liberal candidate.
Calls also were placed to voters with Jewish-sounding names during the Saturday Sabbath and in one riding with a South Asian candidate, voters received phone calls from someone who appeared to be imitating a Pakistani accent.
Those who received the calls say they got them repeatedly and that the person on the other line spoke to them rudely.
Rae says the party received numerous calls Saturday about these calls and have identified at least 27 that were targeted during the May election.
He urged anyone — including Prime Minster Stephen Harper — to come forward with information if they have it as the RCMP and Elections Canada continue with their probe into these reports.
Rae said he has no doubt these “dirty tricks” led to Liberal candidates losing their seats in certain ridings.
On Friday, Rae sent a letter to House of Commons Speaker Andrew Scheer, asking him to allow an emergency debate on the matter when Parliament resumes Monday.
Interim federal NDP leader Nycole Turmel said these types of tactics hurt voter turnout and the democratic process in general.
“It is really sad for the election process,” she said in Toronto. “This doesn’t help people who don’t vote, to come back and believe in the election process.”
But Conservative MP Dean Del Mastro on Saturday said his party also was on the receiving end of such phone calls.
“My own campaign in Peterborough (Ont.) was the victim of dirty tricks phone calls, with Conservative supporters harassed by late-night abusive calls, and our party condemns these acts,”he said in a release.
“The Conservative party is calling on anyone with any information about harassing calls or calls giving inaccurate poll information to come clean immediately and hand it over to Elections Canada,” Del Mastro said.
“We call on Elections Canada to investigate and get to the bottom of this as quickly as possible so the truth is known,”he said.
Ontario NDP leader Andrea Horwath called the calls a “shameful” tactic that people would expect in the U.S. but not in Canadian politics.
“This is not the way to do politics . . . It’s about how do you trick somebody into doing something that will prevent them from voting,” she said at a meeting with the Ontario NDP provincial council. “If that is not an absolute insult to the ideal of democracy — I don’t know what is.”
On Friday, a young Conservative staffer reportedly resigned amid the growing scandal.
It’s unclear what role, if any, Micheal Sona, 23, may have played in this robocall ordeal.
Under the Elections Act, it is illegal to tell voters to go to a wrong or non-existent polling station.
A spokesperson for the Conservatives this week distanced the Tories from the scandal, saying that whoever initiated it did so alone.
<em>- With files from Stephen Maher and Jason Fekete, Postmedia News, and Glen McGregor, Ottawa Citizen</em>

He said government and industry need to prepare a common position to take to the Americans in 2017, in an effort to forge a continental energy and environmental agreement. “I don’t think we should be imposing emission cuts on the Canadian industrial sector until we have an agreement with the Americans, and they are imposing the same cuts on their companies.

“I became convinced of this when I was industry minister. All our economic modeling convinced me of the damage of imposing carbon charges on one side of the border and not the other. The damage is immediate and permanent,” he said.

Mr. Prentice said the benefits of the “energy revolution” will be felt far beyond the oil and gas industries.

NDP leader Tom Mulcair has suggested that the manufacturing has been afflicted by “Dutch disease,” where the dollar has been driven by commodity prices to a level where it is makes manufacturing uncompetitive. Mr. Prentice takes a contrary position, claiming manufacturing stands to benefit from the “re-shoring” of jobs, thanks to a plentiful supply of cheap natural gas.

He said energy-intensive industries like petrochemicals, heavy manufacturing, cement and fertilizers should be able to capitalize on the competitive advantage offered by cheap gas.

“At this point, we haven’t seen the re-shoring of jobs in Canada. But I think it will happen and the reduction in the value of the dollar will help,” he said.

Last year Canada’s trade deficit was $12-billion — compared to a $45-billion surplus in 2007.

CIBC’s deputy chief economist, Benjamin Tal, has defined our national challenge: “The volume of Canadian exports today is at the same level it was a decade ago. Regardless of how you look at it, this was a lost decade for Canadian exports. “

I believe Canadians — and British Columbia, in particular — can do something about this worrying trend.

I have been in Beijing in recent weeks to sign a memorandum of understanding with the Industrial and Commercial Bank of China, the largest bank in China, to finance a $15-billion oil refinery on Canada’s west coast. This MOU states that China will finance the refinery and find markets for all of its output. My company, Kitimat Clean, will build this state-of-the-art refinery in Kitimat, B.C.

The Kitimat refinery will process 550,000 barrels per day of diluted bitumen from the Alberta oil sands, delivered to the site by an environmentally acceptable pipeline (my preference) or by rail. The bitumen will be processed there into value-added fuel products the world needs: 100,000 barrels per day of gasoline; 50,000 of jet fuel and 250,000 of diesel fuel.

With export revenue of roughly $16-billion a year, the refinery will more than balance the country’s trade deficit. In addition, by alleviating some of the supply/demand imbalance for Canadian petroleum, we will also help reduce the $25-billion in annual discounts now given by Canadian producers to U.S. refineries.

Taxes generated for government could amount to $1-billion per year

For British Columbia, the project has equally large benefits. There will be 6,000 jobs created for the first five years of construction. Subsequent permanent employment will be on the order of 3,000 jobs a year for the duration of the refinery’s operating life of 50 to 100 years. Taxes generated for government could amount to $1-billion per year.

A state-of-the art, West coast refinery has some key competitive advantages for Asian markets. We have local supplies of inexpensive natural gas to fuel a refinery and a reliable, long-term supply of low-priced bitumen from Alberta. Supply lines from Canada’s west coast to Asia are nine days shorter than from the Middle East. They are three weeks shorter than from the Gulf Coast.

There are also some key environmental advantages of a Kitimat Refinery that will cement Canada’s reputation as a global leader in cleaner energy.

We will avoid the shipment of bitumen in tankers off the B.C. coast, which has been opposed by a majority of British Columbians. If there were a tanker spill, bitumen would be very difficult to clean up because it is heavy enough to sink. Refined fuels, while damaging, will float and evaporate.

The refinery I am proposing will also be the cleanest in the world. It will meet B.C.’s rigorous air and water regulations. Furthermore Kitimat Clean Ltd. is investigating a new, Canadian-made Fischer Tropsch process that would cut greenhouse gas emissions in half compared with conventional heavy oil refineries.

A recent Mustel Group poll found the majority of British Columbians are behind a refinery if bitumen can be delivered to it in a safe manner

If we build this Canadian West Coast refinery, we will also replace another, less-clean refinery that would otherwise be built to meet the world’s continuing demand for refined petroleum products. Yes, West Coast-refined gasoline, diesel and jet fuel will produce greenhouse gases when consumed. But their production cycle will make them the greenest such fuels on the market for our energy-hungry world.

A West Coast refinery would only be feasible if a sustainable method is created to get bitumen to the refinery, meaning a new pipeline proposal is essential to winning the support of British Columbians and First Nations. This is a genuine obstacle, but one we are confident can be overcome as more British Columbians learn the details of our proposal. A recent Mustel Group poll found the majority of British Columbians are behind a refinery if bitumen can be delivered to it in a safe manner.

It is time for Canadians to fully embrace that idea, particularly in British Columbia, where a provincial election is now taking place. I would urge the NDP and Liberal parties to set aside partisan concerns and look at the virtues of this project. Let’s make Canada a leader in producing the world’s cleanest fuels. Let’s add billions of dollars in export value to our national accounts and create thousands of jobs every year. Let’s embrace our role as a responsible, global energy player.

National Post

David Black is CEO of Kitimat Clean Ltd. and of the Black newspaper group, with interests across North America.

The two most dangerous words in economics are “we need.” Taken together, they indicate the speaker has put aside the careful weighing of costs and benefits that is the ordinary stuff of economics, in favour of sweeping, absolutist prescriptions of what is self-evidently good for all: of what we need. They imply not only an impressive certainty about matters that are by their nature vastly uncertain, but an unexamined conviction that one’s own preferences — I might almost say tastes — in economic activity may be taken for everyone else’s.

Energy seems particularly prone to this sort of windy proclaiming: maybe there is a feeling that God-given resource endowments offer a suitably biblical setting for the issuing of commandments. Here is a typical passage from a recent essay in Policy Options: “We need to decide where resource development fits within the broader context of our national interests. We have national interests that need to be articulated both domestically and to international investors. To achieve the status of resource superpower we need to resolve the national debate on the virtues of resource extraction and accept our role in the world.” Quite what any of this means in concrete terms the reader is left to guess, but the hortatory power of those two words, we need, is undeniable.

Just now what everyone seems to agree we need are sovereign wealth funds, a place for governments, notably Alberta’s, to sequester surplus oil and gas revenues, safely out of the hands of the vulgar public. The Canadian International Council (“We need a Team Canada mindset… we need companies that are or can become global players… etc”), the Pembina Institute, the Canadian Centre for Policy Alternatives, even the Fraser Institute have all issued reports in recent months calling for the creation or expansion of such funds. Of course, in the interim the notion of “surplus” revenues has become something of an abstraction, but nonetheless the necessity of governments annexing a larger share of resource wealth and investing it on the public’s behalf is taken to be self-evident.

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Well, maybe not entirely self-evident. Sometimes the argument is that a portion of the oil output must effectively be quarantined lest it show up instead as export earnings, thus driving up the dollar and leading to the dreaded Dutch Disease. Sometimes the argument is that the revenues should be invested in ways designed to diversify the economy, allowing Canada to move up the value-added chain and escape from the resource extraction ghetto. More generally, the belief seems to be that, if far-seeing governments did not save and invest for the future, no one else would. As a press release from the Fraser Institute — yes, the Fraser Institute — explained: “Failure to save resource revenues in Heritage Fund leaves little for Alberta’s future generations.”

About the Dutch Disease argument perhaps little more needs to be said. The issue is not whether a high dollar is harmful to the manufacturing sector: it is why the interests of manufacturing should be presumed to take precedence over those of the resource sector, to the point that the latter should be subject to a special tax for the former’s alleged benefit. The same applies to the diversification argument. If there are higher economic returns to be had by switching from resource extraction to refining and other secondary industries, the people in those industries are surely at least as capable of seeing this as politicians, and of redeploying their capital accordingly. If there are not, it hardly makes sense for the government to take it and do it for them. (If the issue is diversifying out of fossil fuels, in particular, for planet-saving reasons, a carbon tax is the necessary and sufficient incentive.)

The third argument has rather more to it. It is true that non-renewable resources should be seen as an asset, as a stock of capital rather than merely a flow of funds. As such the present generation has a duty not to “eat the seedcorn,” but to preserve that capital to share with future generations. Rather than spend the proceeds on current consumption, then, the object should be to transform the capital in the ground into other forms of capital: assets yielding a stream of returns into the future.

All of that is true. What does not follow is that these assets must necessarily be held in state hands; that “investment” must automatically mean public investment. It is particularly fascinating to see people urging that funds be ploughed back into the Alberta Heritage Savings Trust Fund, given the quite astounding record of politicization and mismanagement of that honey pot. But it is hardly alone. Quebec Pension Plan, anyone?

I can think of at least three alternatives to the state-investment model that would meet the objective of capital transformation. One, the revenues could be used to pay down public debt — as any financial planner will tell you, one of the best investments you can make, the returns being the interest you no longer have to pay.

Two, rather than going into a centralized investment fund, they could be diverted into individual private plans, rather like RRSPs. They’d still be invested, but by millions of private investors, rather than a handful of public employees.

And three, they could be used as Alberta has used them: to keep personal and corporate income tax rates low. Everyone always swoons over Norway’s massive state investment fund, but the opportunity cost of that mountain of public investment has been punitively high tax rates on private investment. Alberta has chosen a different route, leaving greater room for private capital formation, not only in energy but across the economy. The resulting gains in productivity will pay dividends for generations to come.

The National Post’s editorial board recently highlighted the need to explore new avenues for getting Canadian oil to market. I agree. In the Senate, we have been considering a recent report on Canada’s energy sector — Now or Never, Canada Must Act Urgently to Seize its Place in the New Energy World Order. It is important that all Canadians understand how vital our energy reserves are to the economy, and the challenges that lie ahead for us.

The energy sector plays a vital role in keeping Canada strong, free and prosperous. It employs over half-a-million Canadians and contributed a staggering $94-billion to our country’s exports in 2010. It also contributed $35-billion in taxes and royalties in 2008 to various levels of government. With oil production set to double by 2030, these contributions to our tax base and our living standards will prove crucial to all Canadians. I stress all Canadians. Even provinces without abundant oil resources will share in the wealth through transfer payments.

The energy sector is the largest private-sector employer in Canada. Young Canadians need to be introduced to the opportunities in the energy sector as they plan their careers. Moreover, these opportunities must also be accessible to all Canadians, including aboriginal youth, 400,000 of whom will be eligible for the workplace between 2012 and 2020.

But none of this potential prosperity can be taken for granted. Canadians face significant challenges on the road to fully developing these natural resources. First is the prospect of our biggest customer becoming self-sufficient for its petroleum needs. Energy experts believe the United States may soon no longer need to import oil, and could become a major exporter of natural gas.

Second, Canada loses approximately $28-billion a year in revenue from oil sales to the U.S. Because we do not have access to a diverse global market, there is a glut of Canadian oil that can only be sold to the U.S. This drives down the price our oil can get to below the going rate on the world market. Yet building pipelines to ease this bottleneck faces serious regulatory and environmental challenges.

Third, Canada is facing increasing competition from other oil and gas exporting countries. In the past month, major oil and gas discoveries off the coast of Malaysia, Israel and Mexico have been reported. And the prospect of a natural gas pipeline from Alaska’s north coast to Valdez is closer to becoming a reality.

Fourth, greater efforts must be made to remove barriers to labour mobility, and more must be done to increase trades and apprentice training as part of a national labour strategy, rather than depending on temporary foreign workers.

Canada must seek out and embrace new opportunities and new markets or risk a reduction in our living standard. It is also time we looked closer to home if we are to become truly energy independent. Canada produces enough oil and gas to be self-sufficient, yet we are importing 778,000 barrels per day of crude oil from countries such as Saudi Arabia and Venezuela. The $40-billion we spend buying foreign oil each year is money better spent developing our own resources for export.

That’s why our report embraces the notion of shipping oil from Western Canadian to eastern Canadian markets. Western Canadians have reason to be wary of anything that sounds like a new National Energy Plan. But the reality of oil economics is different today. Higher prices can be achieved for this oil in eastern Canada than in the American Midwest.

Enbridge has confirmed that they have applied to the National Energy Board to reverse the flow of an existing gas pipeline to provide Western crude to refineries in Ontario and Quebec. The company is also actively pursuing talks with the government of New Brunswick about the possibility of building a new pipeline from Montreal to Saint John — where the oil can then be exported to international markets. Canadians should embrace both these proposals.

The Senate Report on Energy could not have been timelier. Our mission was to set the scene for all Canadians to grasp what is at stake — namely our economic prosperity and our ability to fund infrastructure and social programs across the country. I invite all Canadians to read the report and follow the debate in the Senate.

National Post

Senator Daniel Lang represents Yukon and serves on the Energy, Environment and National Resources Committee and on the Standing Committee on National Security and Defence. The report is available on the committee’s website.

What is the government of Canada doing subsidizing hydroelectric megaprojects in Atlantic Canada?

Do not be misled: that is what the federal government’s guarantee of up to $6.3-billion in debt for the Muskrat Falls hydroelectric project in Labrador amounts to. To be sure, Ottawa is not directly assuming responsibility for the debt: so long as the borrowers — Newfoundland’s Crown-owned power utility Nalcor and Nova Scotia’s Emera — are good for the money, the federal government won’t have to pay out a nickel. And yes, the 19-page agreement between the parties is bristling with caveats and riders designed to ensure the guarantee is never called upon.

But let’s not kid ourselves. By guaranteeing the debt, the federal government is assuming a liability. Suppose, instead of standing behind Nalcor and Emera, it had borrowed the money itself, then sought repayment from them. Wouldn’t we agree there was a risk associated with that? The guarantee, though it does not involve a transfer of cash, has a cash value just as if it had. It’s pretty easy to calculate. It’s the difference between the project’s actual cost of borrowing and the costs it would have assumed without the federal guarantee. The figure commonly put about is $1-billion.

It would have been simpler, and more transparent, if the feds had just written the project’s public and private backers a cheque for $1-billion. It didn’t, for the same reason governments always prefer these sorts of complicated, roundabout ways of delivering the lolly: because if it were simple and transparent, everyone could see what was going on. But a loan guarantee — why, it’s nothing at all, really.

As its proponents will patiently explain, it means the project can borrow at the same interest rate as the federal government, rather than at the higher rate creditors would demand of Nalcor or Emera. Great. Why doesn’t the federal government guarantee everyone’s loans, then? Some risks are better than others; if capital is to be allocated efficiently, they should be charged rates to match. Letting poorer risks borrow as if they were better risks steers capital into areas that are not justified by the returns, and encourages too much risk-taking generally.

So I come back to my original question: why is the government of Canada subsidizing hydroelectric projects in Atlantic Canada? To be specific: why is it involving itself in this one? Presumably the project’s backers would agree that it would not go ahead without the federal guarantee (they can hardly admit to asking the feds to put $6.3-billion at risk for no reason at all). That is, absent this disguised subsidy, the benefits would not exceed the costs, including a return on capital sufficient to justify the investment. So how is it in the national interest to underwrite a project whose costs, we have just agreed, exceed its benefits?

Governments always prefer these sorts of complicated, roundabout ways of delivering the lolly: because if it were simple and transparent, everyone could see what was going on

Provinces do this all the time, of course, and it’s always a bad idea. It biases investment toward megaprojects, away from smaller scale ventures; towards hydro-electricity, and away from other power sources; towards energy-intensive industries, away from others — in each case, towards projects that would not have been the best choice on their merits, but only because of the subsidy. Moreover, it is not only the economy of a province that is thus distorted, but the national economy — which is why Europe, for example, prohibits subsidies and other anti-competitive practices as violations of the Single Market.

If it is too much to ask that the government of Canada would exercise the same vigilance over our own common market, they might at least refrain from introducing distortions themselves. Granted, federal equalization payments have the same effect, indirectly: rather than charge the true economic price of the electricity they generate, and have their equalization cheques reduced accordingly, Manitoba and Quebec practically give the stuff away.

But Newfoundland, swollen with oil wealth, is no longer an equalization recipient. So why does it still need aid from the federal government? Yes, appearances can be deceiving: it still carries a heavy debt load. In which case, why is Ottawa inducing it to take on even more debt? The feds’ liability, remember, is capped at $6.3-billion: responsibility for any cost overruns rests with the borrowers. And the cost of the project is already more than $1-billion over initial estimates.

Two arguments have been advanced for why the feds should participate, notwithstanding the project’s dodgy economics. One, it is sold as a means of reducing greenhouse gas emissions. But subsidizing less carbon-emitting forms of energy is always costlier than simply taxing emissions directly. Add Muskrat Falls to the list of costs the Harper government has piled on the taxpayer in the service of its obdurate refusal to consider a carbon tax.

And two, there’s the whole Quebec thing. Muskrat Falls is part of a larger scheme to develop power along the Lower Churchill River for export via Nova Scotia to the north-eastern states. Power from the upper Churchill, readers will recall, is sold to Quebec for a song, thanks to a terrible deal Newfoundland was suckered into signing decades ago; to protect its position, moreover, Quebec refuses to wheel Newfoundland power though its territory on its way to neighbouring markets.

In any self-respecting federation, it would be the job of the federal government to prevent such blatant provincial obstructionism. But this is Canada, so instead the feds provide the financing for Newfoundland to do an end run around Quebec. Two wrongs make a right, I suppose, as long as the taxpayer pays both ways.

Fuel ethanol has been a popular media subject this summer. Is it really because of a record drought in the Midwest U.S.? I am the manager of one of Canada’s largest ethanol plants in Chatham, Ont., and have lived both the science and economics of ethanol production for over 15 years. It continues to amaze me how the media, and through it, the Canadian public, has been hoodwinked about ethanol.

There is much at stake here. Powerful vested interests see ethanol as a threat. Big Oil has enjoyed a monopoly on your gas tank for almost a century. For decades, cattle and hog producers have benefited from cheap corn as a result of billions of dollars in government agricultural subsidies. But over the last 10 years, governments of all stripes around the world have legislated renewable fuels mandates. As a result, grain ethanol is now 10% of the gasoline pool in North America. That’s about 14 billion gallons or 50 billion litres of ethanol production. It’s a huge change; and it’s natural to expect that certain sectors of the economy would want to reverse this and return to the old status quo.

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So they are now waging a war to influence public opinion in an attempt to intimidate government to remove the ethanol mandate. It’s not going to happen. Ethanol opponents have been using the opportunity of a 50-year drought to crank up the hysterics. But the truth is, governments have embraced ethanol because the facts show it is overwhelmingly sensible to do so. It helps to clean up tailpipe emissions, generates real greenhouse gas reductions, reduces our dependence on foreign oil, provides jobs and stimulates incredible economic activity in rural communities.

Here are a few, published, peer-reviewed, facts about ethanol that have been misrepresented in this summer’s media reports:

Only 1% of corn grown in North America is for human consumption at the dinner table. The rest is industrial or feed corn.

Only the carbohydrate from the industrial (not food) grade corn is used to make ethanol. 100% of the protein, fibre, minerals, vitamins and oils are returned to the animal feed market in the form of distillers’ grains.

The United Nations Food and Agriculture Organization says that there is enough food produced annually to feed everyone on Earth. Hunger in the third world results from political strife, corruption and failures of food distribution — not from ethanol production.

The amount of industrial corn used for North American ethanol production last year is roughly equal to the increase in the annual corn crop over the past 10 years, driven by advances in agricultural practices and seed genetics. Corn demand for ethanol has been the catalyst for these advancements.

Even at today’s high corn prices, ethanol is cheaper than gasoline on a mileage-equivalent basis. A 2011 study conducted by researchers at the University of Iowa concluded that without ethanol, the average pump price of gasoline would have been over $1 per gallon higher.

The real driver of food inflation is energy costs for transportation, storage and marketing. A farmer only gets 14.1¢ of the store price where marketing, labour, packaging, transportation, storage and processing costs are 84.9¢.

Ethanol is a safe, natural alternative to the aromatics traditionally used for octane enhancement, and which have been linked to emissions of ultra-fine particulates that cause asthma and other respiratory ailments.

Ethanol is also an oxygenate, which means that its inclusion in gasoline promotes a more complete combustion, with fewer tailpipe emissions. That’s one of the reasons why NASCAR and the Indy cars run on ethanol — it’s more powerful because of the octane, and the cleaner exhaust is easier on the spectators.

Grain ethanol produced at modern ethanol plants generates greenhouse gas reductions of about 60% relative to conventional gasoline. This is important because 30% of Canada’s greenhouse gas emissions come from the transportation sector.

The energy balance of ethanol is very good and getting better all the time. You get between 1.6 and two units of energy output for every unit of energy input.

Meanwhile, I have seen the future. We are making next generation advanced biofuels in Chatham from agricultural waste like corn cobs and stover; from energy crops like switchgrass and tall prairie grass; and from wood waste, including sawdust and wood chips. Canadians should be proud of our engineers and scientists as we pioneer the development of advanced biofuels. I am fully committed to our industry. I love my job and have seen firsthand that ethanol has created skilled jobs at the plants; work for truckers, grain elevator operators and so much more for the community of Chatham, which was hard hit by lay-offs and plant closures. All motorists in should feel good knowing that 10% of what’s in their gas tank is ethanol — the sensible local clean-burning renewable fuel. Don’t be fooled into thinking otherwise.

Stephen Harper is on his annual visit to the North this week, quoting Robert Service and boosting the region’s vast resource potential. “The North” holds a particular place in the Canadian psyche, somewhat similar to that of “The West” in the 19th-century U.S. One thing nobody wants to see, however, is a jurisdictional “Wild North.”

One reason why attention has moved north in recent years is the possibility of regular commercial passage through the Northwest Passage due to climate change. This has brought sovereignty to the fore, an issue given a new twist by the recent transit of a Chinese vessel. China wants Arctic waters to be international, an open approach that is remarkably different from the policy China pursues closer to home.

In fact, Mr. Harper’s visit this year is built around the North’s economic promise rather than the assertion of offshore rights. There is a reason for soft-peddling sovereignty and security. The bold measures Mr. Harper announced in previous years — from new ice-patrol vessels to new research facilities — have been frustratingly slow to materialize. Read more